As chair of the Assembly's Cities Committee, I'm both deeply concerned and deeply immersed in how Gov. Eliot Spitzer's proposed budget will affect New York City. Although I am a candidate for city comptroller in 2009, my immediate and primary duty as a member of the Assembly from the city is to do everything in my power to assure a positive outcome for the people of New York City in the state budget - which must be adopted by April.
Both the state and the city are confronted by the fallout from the irresponsible lending practices that have led to massive financial losses in the credit markets, grief and foreclosures for millions of Americans and to declining tax revenue that is now pressuring our budgets and critical services like education and health care.
The responses of both Spitzer and Mayor Michael Bloomberg to the financial pressures created by the economy are actually similar. With a deficit now predicted at $4.7 billion, Spitzer has pledged "no new taxes" and is cutting spending on education, health care and other programs. Bloomberg is looking to protect $1.35 billion in tax cuts budgeted for fiscal year '09, while cutting education and other services in the middle of the fiscal year and into next year.
The mayor is also using $4 billion in cash surpluses to help cushion the estimated $2.75 billion deficit for the 2009 fiscal year. However, because more than 50 percent of the city's budget involves obligations that are not within the city's discretion -- like pensions, debt service, and Medicaid -- the area feeling much of the pain right now is education, which accounts for 30 percent of the city's budget.
Keeping Education Afloat
Although the governor is giving the city's public schools a 7 percent increase -- or $540 million for fiscal year '09 -- the second year of the state's commitment to the Contract for Excellence is not fully funded by at least another $300 million, including a reimbursement for 50 percent of the city's school construction costs. At the same time, the city's contribution to the schools is primarily covering increased pension, fringe benefit and debt service expenses, leaving little left over for other rising expenses like salaries and fuel.
The city is imposing a mid-year $180 million cut to the public schools, followed by a $324 million cut for the school year beginning in September. Since the governor's Contract for Excellence plan called for a $5 billion increase in funding over four years, split 60-40 between the state and city, I am advocating the state make up the city's cut to the schools by adding at least $200 million in state education aid and require that the city increase its contribution proportionately, which would more than make up for the $324 million cut. This money would come from an income tax surcharge on the wealthy.
I am also advocating for full restoration of the city's revenue sharing aid, which Spitzer inappropriately cut last year, to a full $328 million or $164 million for the coming year above the governor's budget.
Beyond The Books
The New York City Office of Management and Budget has estimated the shortfalls in aid for the city in the state budget will leave a $500 million hole in the city's financial plan. Of course, the city could use more of its surpluses to cover the needs of its schools and other services, or cut back on its planned tax cuts. However, those surpluses need to be carried forward to deal with deficits in the years to come. Ideally, the state should return to the progressive choices it made in 2003.
Then, confronted with a $10 billion deficit in the wake of the recession following the attacks of September 11, 2001, the legislature enacted a modest income tax surcharge on families making more than $150,000 a year. That surcharge raised nearly $2 billion. Although Gov. George Pataki predicted the sky would fall if the surcharge were enacted, the legislature overrode his veto, and within a few years the economy recovered and the state was in surplus. This year we do not need a full $2 billion, so the surcharge would be very modest and begin at incomes over $200,000 a year.
Of course revenue from an income tax surcharge has to be distributed fairly across the state, but the New York State could help New York City meet its needs and protect education from cutbacks at the historic crossroads of an improving public school system.
As a comptroller candidate, I would use my experience in the state budget process to help the city achieve a balanced budget and fiscal health going forward. Doing well vis a vis the state budget will provide great relief for the city's budget, and moderating property tax cuts is one route to that fiscal stability. Important cost-saving ideas identified by the Independent Budget Office - consolidating health and welfare funds, merging some of the pension funds - are worth consideration but they can only be achieved through collective bargaining and legislation. Energy conservation is an area with untapped potential for savings for the city. Investment in greater efficiency could yield tens of millions in savings. In addition, providing on-site electric power and using by-product energy for heat and air conditioning for major facilities such as college campuses, hospitals, schools and municipal buildings could save the city millions.
As comptroller, I would identify savings and inefficiencies through audits and studies of these and other issues. By conducting continuous objective appraisals of the city's financial condition I would play an integral role in helping the city to confront our fiscal problems responsibly, effectively and creatively.
Jim Brennan, a Democrat from Brooklyn, has served in the New York State Assembly since 1985.